May 1 is celebrated as, obviously, May Day. Across much of the world, at least part of today is dedicated to acknowledging, usually festively, workers' contributions.
However, it also can be a warning. Mayday as one word, mayday, often repeated, it is an internationally recognized distress signal.
During the coronavirus pandemic, both etymologies apply.
Scary, nonworking May Day: Workers globally have lost their job as businesses have closed to help slow the spread of COVID-19. We're still recognizing the work that so many continue to do, even in the face of this deadly disease, but most of the celebrating is done at a safe social distance.
As for warnings in coronavirus time, you also can add the mayday call to myths about the relief payments that millions in the United States are awaiting.
Those who've lost their jobs (and more, such as their medical insurance), are desperate for the checks, which could be as much as $1,200 person plus $500 for qualifying dependent children.
But the wait for and confusion about the payments' computation and delivery has led to many misconceptions. Here are five common COVID-19 economic relief payment myths making the rounds.
1. Everyone is going to get $1,200.
While many are, the maximum $1,200 person payout isn't going to show up in every person's bank account or snail mail box. People who have higher incomes will see their payments reduced phased out incrementally for individuals with no children where their adjusted gross income (AGI) is more than $75,000 for single people; $112,500 for taxpayers filing as head of household; or $150,000 for taxpayers filing a joint return.
The Coronavirus Aid, Relief and Economic Security (CARES) Act that created the payments also decreed that folks won't get any COVID-19 relief money if their AGIs are more than $99,000 for single filers; $136,500 for head-of-household taxpayers; or $198,000 for married couples filing jointly.
The phase-out income levels are a bit higher for folks with kids. The Internal Revenue Service table below shows how the COVID-19 economic relief payment is reduced based on your AGI and number of eligible children (those age 16 or younger) you can claim.
Even those who do qualify for the maximum payout could see less when it arrives. The COVID relief payments are not subject to most types of federal offsets that usually are attached to things like your tax refund, such as overdue student loan payments or unpaid taxes. However, if a recipient is behind on child support, that due amount likely will be taken out before the relief payment is made. There's also the possibility the payments could take a hit from some types of state or local government garnishments, as well as court-ordered paycheck collections.
2. Unemployment benefits disqualify you from getting the payment.
Not true, and that's a huge sigh of relief you're hearing across the country from the more than 30 million folks thrown out of jobs since the coronavirus began spreading across the United States. So collect that unemployment check (if your state government is able to get it to you) and expect your COVID-19 economic relief payment, too.
The federal relief payments being distributed now are based on the amount of money you made either in 2018 or 2019. The Treasury and IRS don't care what you're making (or not) in 2020. However, this year's income could come into play as far as COVID-19 relief when you file your tax return next year. If you didn't get the maximum amount based on your prior taxes, for example, you had an eligible dependent this year who was not shown on your earlier returns, you can claim that relief amount when you file your 2020 taxes in 2021. Yeah, I know. The wait is not what you need. But at least you'll get your money eventually.
3. The COVID-19 economic relief payment is taxable income.
Again, no. The relief money is not income. It is a tax credit. Just like the child tax credit or Earned Income Tax Credit (EITC), it's a tax break that's calculated based on your eligibility and is used to offset any tax you owe. Tax credits aren't taxed. In some cases, they're even refundable, meaning you get money back even if you don't owe taxes. You don't owe taxes the next year on any credits you get on your prior tax filings.
This tax credit math is usually done when you file your return. But in order to get the COVID relief money out more quickly, it's being issued as an advance tax credit on your 2020 taxes based on your 2018 or 2019 returns. But its tax treatment remains the same. It's not taxable.
4. You'll have to pay back a too-big COVID-19 economic relief payment.
This is the companion to the tax credit myth. Again, not true. While the multiple tax years involved in the COVID relief payments definitely lend to the confusion about the money, the good news here is that if you got an overly large amount based on your 2018 or 2019 returns, don't worry about it.
Uncle Sam says that even if your 2020 taxes, for which the payment is an advance tax credit, shows you should have received less, you get to keep the over payment that the government made this year. That's because at the time the IRS calculated the COVID-19 relief amount you were due, the agency was using the latest info it had, your prior filings. So even though it technically is a 2020 tax year advance credit, the timing of its early delivery means that the IRS doesn't care about your 2020 money, at least as far as the COVID-19 economic relief payment is concerned.
And there's even better news. As noted in myth #2 and worth repeating here, if you didn't get as much this year in your COVID relief payment as you eventually find you are due based on your 2020 tax situation, you can collect that unpaid amount when you file your 2020 return next year.
5. There are special ways to speed up delivery of my relief payment.
Treasury and the IRS already have established the payment schedule for the COVID-19 economic relief money. It's going to direct deposit accounts first, then paper checks will be dropped in the mail. The payments also are being sent to the lowest-income taxpayers first in either the electronic or snail mail delivery route.
The only sure-fire way to get your COVID-19 economic relief payment more quickly is to get your direct deposit data to the IRS using the enhanced Get My Payment tool. If the IRS doesn't have that information, it will mail you a paper check via the U.S. Postal Service. But you need to hurry. If when you do try to let the IRS know your bank info you find that it's already decided you'll get a paper check, you can't change that. You'll get a paper check.
So don't fall for "offers" that promise to get you your COVID-19 money more quickly. Any phone calls or texts or emails from folks, some pretending to be with Treasury, the IRS or the Social Security Administration, are coronavirus scams. Don't fall for them. It could cost you even more than the relief payment amount you're expecting.
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.